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The US dollar held gains on Thursday as a stronger-than-expected US private-sector jobs figures in February sealed expectations that the Federal Reserve will raise interest rates next week.

PHOTO: BLOOMBERG NEWS

[TOKYO] The US dollar held gains on Thursday as a stronger-than-expected US private-sector jobs figures in February sealed expectations that the Federal Reserve will raise interest rates next week.

The US dollar index, which measures the greenback against six major peers, was last up 0.1 per cent at 102.12, not far from a March 2 peak of 102.26, which was a level unseen since Jan 11.

The ADP National Employment Report showed on Wednesday that private payrolls grew by 298,000 jobs last month, the largest increase since December 2015. The gain was well above economists' expectations for a 190,000 increase.

The ADP figures come ahead of the US Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

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Traders now price in an 85.2 per cent chance of a rate increase, according to Thomson Reuters data, up from 30 per cent at the start of last week following hawkish comments from a string of Federal Reserve officials, including Chair Janet Yellen.

The strong gain in private-sector jobs pushed benchmark US Treasury yields to their highest since December.

The 10-year US Treasury note yield hit 2.583 per cent, a level last seen on Dec 20. It last stood at 2.563 per cent.

The US dollar was last up 0.1 per cent at 114.47 yen. The greenback was helped by the widening US-Japan interest rate differentials. It had risen as high as 114.75 yen on Wednesday, not far from a two-week high of 114.955 touched on Feb 15.

However, investors were cautious ahead of Friday's non-farm payrolls as the ADP figures have proven a poor indicator for the awaited jobs report by the government, which is favoured by the Fed.

"After a change in ADP's methodology in October, its figures have become closer to the government's data. So we could expect an upbeat figure on Friday," said Junya Tanase, chief currency strategist at JP Morgan Chase Bank.

"However, investors have already priced in February's strong job growth, so it is less likely that the US Treasury yields jump once more and the US dollar rallies unless the data is very strong," added Mr Tanase.

The euro last stood at US$1.0537, wallowing near a one-week low of US$1.0533.

Investors were also awaiting the conclusion of the European Central Bank's March meeting on Thursday. There is little expectation that ECB President Mario Draghi will announce changes to the bank's ultra-loose monetary policy despite rising inflationary pressures.